An economic shot in the arm
Ding Ying

On February 13, U.S. President George W. Bush signed legislation for an economic stimulus package worth about $168 billion to help salvage the dismal U.S. economy. The whole process of approving the program was finished within one month, after the Bush administration originally put it forth on January 18. U.S. Congress passed the draft in early February and several days later the president issued the program. Chinese economic experts said the plan would work well to stimulate U.S. domestic consumption and eventually usher in a general economic revival. “The U.S. Government’s high level of efficiency in this case reflects how serious the situation is now with the U.S. economy, which is worse than our prediction in December 2007,” said Chen Fengying, Director of the World Economics Studies Center at the China Institutes of Contemporary International Relations (CICIR). Many experts previously said the slumping U.S. economy was not having any great impact on the country’s growth.
Chen said economists and observers have not been entirely clear about the future of the U.S. economy. This is why the International Monetary Fund and the World Bank postponed their forecasts about the performance of the U.S. economy in 2008, she said.
The Bush administration believes the plan will quickly revive the ailing American economy. The government will spend about $168 billion, instead of Bush’s original proposal of $145 billion, on stimulating individual spending, as well as investment by enterprises, to try to prevent the onset of a recession. In May, it will start issuing rebate checks of $600 for individuals and $1,200 for working couples in hopes that they will use the money to purchase goods and services. Those with children will receive an additional $300 per child under the plan. About 130 million Americans will be eligible to receive tax rebates. The program also encourages enterprises to buy new plants and equipment in return for tax relief incentives. The government will implement the program this year and in 2009.
Many American officials and economists expressed their confidence in the measure. House Speaker Nancy Pelosi said the package would create more jobs and generate economic growth. U.S. Treasury Secretary Henry M. Paulson specified that the program would create 500,000 to 600,000 jobs. Some economists are now predicting that the country’s annual economic growth rate could increase at least 0.7 percentage point more than the previous forecast. Stuart Hoffman, chief economist of PNC Financial Services Group, told the Associated Press (AP) that with the economic stimulus package the U.S. economy would grow 2.25 to 2.5 percent in the second half of 2008-1 percentage point higher than without it. “I do think this will give the economy a shot of adrenaline,” Hoffman told the AP.
Just buy more
“If U.S. citizens use their tax refunds to purchase goods and services, the country’s gross domestic product (GDP) growth would increase at least 1 percentage point in 2008,” Zhen Bingxi, a senior research fellow at the China Institute of International Studies, told Beijing Review. He pointed out that the total annual consumption volume of the United States was about $9 trillion, which is the highest in the world and accounts for a large part of the country’s GDP growth.
China’s business journal Economic Observer published an article on February 14, arguing that the stimulus package would only work as planned if Americans used their rebates to buy goods and services. It cited an AP-Ipsos poll, in which only 19 percent of those surveyed said they would spend their rebates, while 45 percent said they would pay off debts and loans. Another 32 percent said they would invest the money, and the remainder indicated they would save the money because the future economic situation was still unclear.
Chen of the CICIR believes that the stimulus package will be sufficient. “This act will work more like a government signal, which will help Americans to regain confidence in their economy, instead of practical economic profits,” she said. “This is more significant to Americans.” Chen noted that even though the U.S. economy started sliding on a large scale in late 2007, it still continued to grow, though at a very slow rate. She also pointed out that the U.S. unemployment rate was 4.9 percent in January, slightly lower than 5 percent last December. And while American lawmakers are concerned with the expanding budget, Chen said that it had decreased last fiscal year. According to statistics issued in November 2007 by the U.S. Department of Treasury, the country’s budget deficit for the 2007 fiscal year was $168.2 billion, a decrease of 34.4 percent over the amount during the same period in 2006. This was the lowest increase during the last five years.
The major effect of the sliding economy was not a decline in GDP growth, but Americans’ waning confidence about the future of their economy, Chen said. While they do not lack the money to buy goods and services, they worry about their futures. “The U.S. Government’s plan to salvage the economy helps the consumers to regain their confidence, even before the rebate checks are issued,” she said. Shen Minggao, chief economist at Citibank China, told China Business News that while the massive rebate check plan would stimulate U.S. consumers’ desire to buy goods and services, the contemporary tax benefit plan would promote investment by enterprises. The plan would save nearly $50 billion in taxes for companies by cutting their tax levied on purchases of new equipment, software and fixed assets by 50 percent this year. For example, if a company purchases equipment valued at less than $800,000, it would save about $12,800 to $25,000, Shen said. This would enable firms to expand and create more jobs, he said.
Other causes, other means The economic stimulus package comes as the U.S. Government is also trying to fix its financial sector, which has been badly damaged by the subprime mortgage crisis. The crisis not only had a negative impact on banks and investors who purchased bank bonds, but also created a large amount of bad debts that triggered a liquidity shortage inside the American banking system, Chen from the CICIR said. Because the American real estate industry has been in a downturn since 2001, the real estate industry and mortgage banks started issuing loans to lower-income borrowers, many of whom were unable to pay increasing bank interest rates. This in turn caused a liquidity shortage. The crisis prompted the Bush administration to make a deal with the mortgage loan industry in December 2007, in which lenders would freeze part of their interest rates to sustain borrowers’ abilities to pay their loans.
Chen said this measure would not only eliminate the pressure of holding bad debts from the mortgage banks and sooth the current liquidity shortage, but also prevent the country’s economy from a possible financial crisis, which would have both national and global reverberations. The bright side of the U.S. economic downturn is that although the real estate industry has nosedived, the stock market is still afloat, she said. The market is wavering, but remains in a controllable range, she added.
Chen said that there were other options for the U.S. Government to take to help revive the economy. As of mid-February, the U.S. Federal Reserve had cut benchmark interest rates to 3 percent. Chairman Ben Bernanke hinted that it was planning a further cut.
“Compared to the lowest interest rate level of 1 percent, there is still space for reductions, but the space is more and more limited,” Chen said. Chen also noted that the depreciation of the U.S. dollar could transfer the possible economic crisis to other countries. Although the stimulus package aims to create a quick economic boost in the short term, there is sill a possibility that the Bush administration could issue a longer-term policy on improving the economy, especially before the U.S. presidential election in November this year. The following months will be crucial for the presidential candidates of both parties. If the Bush administration is not successful in salvaging the U.S. economy, the Republicans will not have a chance to win the election, Chen said. Neither the Republicans nor Democrats want to be responsible for slowing down the country’s economic development during such a decisive period, she said, noting that this was the reason why leaders from both parties very quickly approved the economic stimulus package.

(The Daily Mail-Beijing Review Articles Exchange Item)



Election-2008: Breaking with the past
Nabeel Ahmed Sheikh

IT IS surely a matter of utter satisfaction for the people of Pakistan that a new phase of the democratic process has begun after the much-trumpeted parliamentary elections which are expected to augur positive for country’s political future. The elections have been held in a free, fair and transparent manner, as promised by the government and despite threats of terrorism, by official reports, at least 45 % turnout of voters was recorded. No doubt, there have been some unfortunate incidents but overall the voting process was held in a peaceful and orderly manner. Elections-2008 have been given the ‘satisfactory’ grading by the International observers including comments of 150 member EU observers who said that Pakistan’s elections can stand up to any scrutiny. The observers spent some two months in the country. Barring few, most politicians and political parties including major opposition parties are by and large satisfied with the elections.
In fact, every Pakistani deserves credit for this great achievement that will prove to be a milestone for consolidation of the democratic process and has the potential to usher in an era of political and social stability provided all the players concerned demonstrate the sense of maturity and seriousness that is need of the hour in these special circumstances. The people have reposed their confidence in the moderate leadership and voted out the religious and possibly extremist junta in the elections. They have given a resounding response to those elements who were voicing concerns of Pakistan’s nuclear programme falling in the hands of extremists. The Election Commission of Pakistan merits praise for managing to conduct elections in a befitting manner in view of constraints of time, terror attacks and scathing criticism of the political leaders despite allegations of being bias towards the former dispensation. The results of the elections clearly show that these were held in a fully fair and transparent manner despite a flurry of allegations made by the Opposition parties and local/foreign observers day in and day out about possibility of rigging. Apart from people of Pakistan, almost entire world community was deeply interested that the polls should be free and fair and should be seen as such. It would not be exaggeration to say that the 2008 were the most watched elections and it was also perhaps because of this that the government and the Election Commission of Pakistan took extra care to address complaints and incorporate suggestions to make the exercise transparent one.
Although the President has been targeted by the political parties, especially those who were in exile earlier, it must be acknowledged that he managed to give the nation its first truly free and fair elections since 1970. After and before the general elections, President Pervez Musharraf said that he would work with the new government, hoping that it would follow a conciliatory course. “The confrontational politics of the 1990’s should be left behind,” the president said in his first major interview with ‘The Wall Street Journal’ after the national polls which have universally been acknowledged as free and fair. Along with the people of Pakistan who must be praised for using their vote with maturity and prudence, the media deserves kudos for acting as a watchdog on unprofessional conduct and malpractice albeit it in its exuberance sometimes overreacted and at times due to lack of training, released information without verifying its credibility. Without casting aspersions on their intentions, the media has played a major role in the transition to democracy. The latest political dynamics dictate that the political parties respect the confidence reposed in them by their electorate and instead of wrangling for power through unfair means, they should opt for conciliatory politics and harmonious interaction among themselves. The new leaders have their task cut out before them through challenges that require their utmost acumen, leadership and concentration. The challenges are in the form of the wave of terrorism pervading the region, shortage of electricity, food and fuel.
The troubles facing Pakistan in the form of terrorism and extremism can be resolved to a large extent once the representatives of the people sit in the parliament and deal with the problem pragmatically. It is a positive sign that those who did not achieve victory in the polls have accepted their defeat with grace while those who have emerged victorious are displaying maturity. PML President Chaudhry Shujaat Hussain and former Punjab Chief Minister Chaudhry Pervez Elahi have said that their party would play a positive role in the Opposition in the future and not resort to negative political tactics. PML senior leaders further said that they would extend cooperation to the future government on issues of national importance while keeping a close watch over its any wrong doings and failures. The Chaudhrys from Gujrat had earlier shown their political sagacity and decency by accepting the verdict of the masses and admitted that energy, wheat and judiciary crises were the main reasons behind the defeat of their Party. Chaudhry Shujaat Hussain was within his right to say that despite debacle, the party had emerged as the only one, which still enjoys support in all the four provinces as it won seats there which reflected its nationwide presence. Win or defeat is part of democratic process and the beauty of the system is that today’s Opposition is a government in waiting.
The tribulations and trial dictate that instead of being vindictive and vengeful, the political parties, who will form the government, would bury the past and instead concentrate on nation building. The people of Pakistan have demonstrated that they themselves are the best judge of the performance of their elected representatives. This is the true essence of the democratic process, which has made a sound beginning but requires a concerted effort to meet the demands of good governance. Therefore, political leadership is expected to rise to the challenge of taking the nation out of troubled waters instead of succumbing to the temptation of the politik of power and personal vendetta.





Ethiopia’s war begins in America
Ronan Farrow

THE bullet tore through Ibrahim Hamad’s torso and lodged in his hip. The 26-year-old teacher was at home with his elderly father when government forces swept through his town in the Ogaden region of Ethiopia, burning huts and killing civilians. “The young girls were the first to die. The soldiers shot them and gathered the bodies and burned them,” he said. The troops demanded that surviving men join their ranks, threatening those who refused with torture, imprisonment and death. “When they came to my home, I told them, `I am just a schoolteacher, I will not leave my family,’ “ Hamad said. In a bleak whisper, he recounted the ordeal that followed. “They strangled my father with a wire and hung his body in a tree. Then they shot me and left me for dead.” Hamad now struggles to survive in Dadaab, a remote refugee camp in northern Kenya, joining thousands who have fled a reign of terror by the Ethiopian Army. Little noticed by the world, Ethiopia is waging war against its own people in the Ogaden desert. Long-simmering tensions erupted in April when separatist rebels attacked a Chinese-run oil field. The Ethiopian government responded by ejecting humanitarian agencies and launching a scorched-earth campaign in the region. The targeting of the predominantly ethnic-Somali Ogaden population has led to accusations of ethnic cleansing. In October, Human Rights Watch warned that events in Ogaden were following a “frighteningly familiar pattern” to those in Sudan’s Darfur region, noting “ethnic overtones” to attacks and accusing Ethiopia of “displac(ing) large populations” and “deliberately attack(ing) civilians.” Government forces have been implicated in escalating looting, burnings and atrocities. Recently, soldiers have begun a brutal campaign of forced conscription, often torturing or killing those who refuse to join. The Ethiopian government has suppressed most news from the region, sealing Ogaden’s borders and denying access to the media. In May, three New York Times reporters researching the crisis were held for five days and had their equipment confiscated. Ethiopian officials have been quick to dismiss mounting reports of bloodshed as propaganda. But in this camp, refugees fleeing Ogaden tell stories of rape, torture and mass murder perpetrated against civilian villages by Ethiopia’s military. However, it is the US government, not Ethiopia’s, that elicits the most anger from Hamad and the other Ogadenis seeking shelter in Dadaab. The bullet that shattered Hamad’s hip, and the gun that fired it, were likely supplied by the United States. The soldier who pulled the trigger was almost certainly compensated with US military aid. The US historically has provided Ethiopian forces with arms, funding and training.

—Arab News